Study: States that raised minimum wage had stronger job growth

State minimum wage increases are part of a national movement to raise the pay of low-wage workers. (EPA, Eric Lesser)

A recent study by the Center for Economic and Policy Research attempts to undercut the argument that raising the minimum wage kills jobs.

The study, which updates a Goldman Sachs analysis to include data from April and May, shows that the 13 states that increased their minimum wages on Jan. 1 have had stronger employment growth than the 37 states that didn’t. The study compared average employment during the first five months of 2014 with the last five months of 2013.

The average change in payrolls in the 13 states that increased their minimum wages was 0.99% vs. 0.68% in the other states. On January 1, Connecticut, New Jersey, New York and Rhode Island boosted their pay floors as a result of legislation. The other nine states – Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Vermont and Washington – automatically raised their minimums by smaller amounts based on inflation.

Critics of minimum wage increases argue they raise business costs, forcing employers to lay off workers or hire fewer people.

But CEPR senior economist John Schmitt says one reason minimum pay hikes actually could bolster employment growth is that they help businesses fill openings more quickly. Big employers of low-wage workers, such as fast food chains, virtually always have job vacancies, he says.

Another reason, he says, is that low-wage workers tend to spend nearly all their extra cash, lifting the local economy and creating more jobs.